Making cancer drugs less expensive

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By Hagop Kantarjian,,

Tito Fojoand

Leonard Zwelling

February 22, 2013

Hagop Kantarjian is chair of the leukemia department at M.D. Anderson Cancer Center in Houston. Leonard Zwelling is a professor of medicine in M.D. Anderson’s department of experimental therapeutics. Tito Fojo is head of the experimental therapeutics section at the National Cancer Institute in Bethesda.

In his book “Justum Pretium,” Aristotle discusses the relationship between price and worth, a topic continued 16 centuries later by Albert the Great and Thomas Aquinas. They concluded that out of moral necessity, price must reflect worth. As oncologists mindful of the expensive technology and therapeutics we employ, we agree with this.

We believe that the price of cancer drugs is too high. Those already-high prices, which continue to rise rapidly, are an increasingly significant issue in U.S. health-care expenditures. The average monthly price of cancer drugs has doubled over the past 10 years, from about $5,000 to more than $10,000. Of the 12 new cancer drugs approved by the Food and Drug Administration last year, 11 were priced above $100,000 annually. Yet only three were found to improve patient survival rates and, of these, two increased survival by less than two months.

All this shows little or no correlation between drug efficacy and “just price.” Medical bills have become the major cause of personal bankruptcy in the United States, which is not surprising, given the amounts that even well- insured patients have to pay for drugs. Those that cost more than $100,000 can command a quarter to a third of some households’ annual income.

Once a cancer drug is approved by the FDA, the pharmaceutical company that made it determines its price. This is based on research and development costs and the expense incurred in creating drugs that were not successfully developed, as well as regulatory, education and advertisement costs. To outsiders, these prices can seem arbitrary. Often, the price is set above that of a similar drug on the market.

Is this a way to establish a just price? Should drugs that truly prolong survival cost no more than those that simply shrink a tumor without lengthening a patient’s life? How can we justify drug prices that are 50 percent lower for patients covered by the Department of Veterans Affairs than for those covered by Medicare because the VA can negotiate what it pays for drugs but Medicare cannot? Is it fair that some U.S. drug prices are two to four times the price of the same product in other countries? U.S. drug manufacturers are also allowed to pay the makers of generic drugs to keep their cheaper versions off the market for some months. Known as “pay to delay,” this strategy greatly affects profits: Earlier introduction of generic drugs has reduced health-care spending by more than $1 trillion in the past 10 years, Ralph Neas, president of the Generic Pharmaceutical Association, estimated last fall.

And how do we reduce the price of cancer drugs? We can start by eliminating self-inflicted wounds: Medicare should be allowed to negotiate prices as the VA system does — and as Medicare was able to do before 2003 — and pay-for-delay strategies should be outlawed. Regulations on cancer research that add to costs without increasing patient safety should be curtailed. Regulators and investigators alike should demand that new drugs offer true clinical improvement over current drugs, measured by such standards as cost-efficacy ratios, prolonging of life in years or quality-adjusted life in years, not just efficacy, safety and other “me-too” criteria.

Finally, market forces should have a greater role. The price of most traded commodities is based on supply and demand; this should be true of cancer drugs, too. Factors for pricing could be based on an objective measure of patient benefit, such as the average number of months lived longer with the new drug, with higher pricing for more months; the degree of tumor shrinkage; improved quality of life; or months lived in remission. If prices were set with FDA approval, to help keep rates at what the market can reasonably bear, costs would likely be significantly lower, as is the case in European Union countries such as Britain, where regulators approve drug prices.

As we come to better understand the molecular basis for cancer and develop more targeted and personalized therapies, we need to realize that “benefit” must, of moral necessity, be linked to price and that price cannot be raised infinitely without a “morally acceptable” financial ceiling that, in aggregate, would not bankrupt our health-care system or those unfortunate enough to develop cancer. A serious examination of initial pricing based on true clinical value is needed. Arriving at a just price will be difficult, but our national financial well-being and physical health are at stake.

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